A Clue...to Internet Commerce

by Dana Blankenhorn

For the Week of September 8, 1997

Volume I, No. XXVIII

This Week's Clue: Big vs. Little

The interests of large and small businesses often diverge. For proof just compare the U.S. Chamber of Commerce with the National Federation of Independent Businesses.

On most issues, this just means the small fry are more rabid than the big boys. DuPont can live with regulations, but if Joe's Garage Shop is held responsible for the oil it leaks into the river, or if he's expected to pay a living wage (with benefits) to workers, he might go under. So he'll raise cain.

There is, as yet, no NFIB for electronic commerce, but it's already clear the interests of large and small merchants on the Internet have diverged. Basically, the more complex the process of doing business, the better for the big boys. Thus, big businesses are willing to accept content regulation (in the form of mandatory ratings), complex technologies like SET, and they take pride in putting high-octane pages online - lots of .gifs, graphics, and noise substituting for content. Their view is that the online world will be like the real world Real Soon Now, that 95% of the action will be split among the usual suspects and the rest won't have the funding to compete.

Basic online economics argue against this view. Storage prices keep declining, on a per-megabyte basis. Software for Internet vending is available at low cost. Bandwidth to a well-hosted site can be priced flexibly and competitively. The only shortage is one of talent, specifically entrepreneurial talent. To keep costs low, many companies are moving people in from other departments to run large Web sites. That is a mistake. Since most entrepreneurs prefer to run their own shops, I submit, it's their game to lose, not the conglomerates'.

In public policy, however, the Internet has been represented only by big players, which can afford the tariffs and time necessary to make the meetings. Small Internet companies and their interests have been ignored, which I think explains the "mess" we're seeing in Washington. Not only are policymakers hearing only from groups representing big commerce players, they're only reading what comes from the big media. There the Internet is portrayed as a crime-ridden district where child molesters lurk, where libel abounds, and where everyone's out to rip you off. It's downright Orwellian - freedom is portrayed as slavery, lies are truth, democracy is tyranny.

Organizing small merchants and content providers is a daunting task. Bringing enough of these squabblers together so you can reasonably claim to represent the whole, then divining what they all want in terms of public policy, would try any politician. But that's just what we need. A name politician working with a technically-savvy team which can locate small merchants, sign them on, then represent their interests. Before those interests are given away, and the costs of doing business raised so high only Mickey Mouse outfits need apply.

So here's a Clue for Bill Weld, former Massachusetts Governor and self-styled political Don Quixote. Forget Mexico and call Mitch Kapor.

SSP (Shameless Self-Promotion)

We got game. In May it was USA Today , calling us a "hot site." Next came Jayde , which gave our PPN site, run by Sean Cafferky of Houston, its coveted "Jayde Gold Diamond" award. Then the "San Jose Mercury News" Online Today columnist, Patricia Sullivan , wrote in her "Good Morning Silicon Valley" column we've got things to say which are worth hearing. Now it's Investors' Business Daily, for the second time, mentioning us in their computing column. Thanks so much.

Want to know what you can do to help? Remember that it's Journalism -- checking the news, calling people, listening carefully, writing on deadline -- which keeps the clues coming, although I also handle consulting and commercial writing (ask about those rates via e-mail). If you're looking for excellent work -- like that found in my column at Atlanta Computer Currents or my regular work for Net Marketing magazine don't wait for the e-mail -- give me a call at 404-373-7634.

And now back to our show...

Back to the Books Again

Last week we suggested that it's the cost of marketing - convincing someone they should buy a book - that is the biggest hurdle in marrying on-demand publishing with Internet technology to create a new kind of publisher.

Bruce Batchelor, who runs his on-demand printing company, Trafford Publishing , as a "self-publish" house, chimed-in to take issue with this view. "The lion's share of the gross revenues go into the distribution channels," he writes. Figure on 40% off the top to the bookstore; 10% for shipping; 15% for warehousing and sales reps' fees; 10% for advertising and promotions; 15% for manufacturing; 10% for administration, and 10% for editorial costs. "The reason these don't all add up to 100% is that most publishing companies LOSE money," he adds. "The economics of trade publishing are very depressing. The prospects for SELF-publishing are no better," he adds. "Only a very few become profitable." And forget 15% to the author - try 6%, he adds.

What's the solution? "It may turn out to be a different breed of beastie altogether: a means for NICHE publications to be distributed, rather than a way to compete with conventional bookstore distribution." That would be a good start. But if Bruce is right, and no one in today's book publishing field is turning a profit, the opportunity we're discussing could be bigger than we imagined. Certainly major publishers could find any formula we develop and copy it, but that's true everywhere. The trick is to get into the game.

Solving Unreal Problems

The growing dominance of Web coverage by Big Media, which prefers heat to light, and insists that those who rise through its bureaucracies cover beats they know nothing about, means we'll get lots more stories like Time's recent "Death of Privacy" special report. All the dangers cited here have existed for decades - what's changed is they're within easy reach of small businesses which either don't know, or don't care about, the rules of the privacy road.

Take cookies, for instance. Please. They're a nice technology. They solve a real problem. They turn a "browser" into a "regular," so you don't have to introduce yourself to the bartender every time you walk in. But some have abused them. Big sites have given browsers dozens of cookies to track their behavior (instead of just one). Other sites have used cookies to track users throughout their Web travels, leading to fears they're creating "profiles" which can be used by employers and other fools. Thus, the desire for "cookie killers" .

Another non-existent "problem" is the delivery of ads while you're waiting for files to download. Echomedia and Streamix have responded by essentially turning a META tag command into a product you can use to double the displeasure (and length) of this World Wide Wait by inserting ads into the download stream . Thanks to Andy Bourland of Clickz for exposing this scam.

Unreal Solutions to Real Problems

There is a real, growing problem for Web merchants. That is, keeping the Web site "manned" so viewers can chat, and get responses to their questions, 24x7. The first place where this is being felt is in the area of customer service, and eshare has responded with a suite called Expressions. Instead of having you wait for a phone operator when you can't figure out your software, you can be directed into a chat room where several calls can be dealt-with at once. If the operators are all gone, you might be moved to a threaded discussion group.

There is a big opportunity here for a Web "service bureau" which can virtually "man" merchants' Web sites and answer questions, chat, or take orders so the site is both live and human. Some 20 years ago, TV commercials hawking "800" numbers would lead you to call folks called "formatters," who would read a script and take your order, then forward it appropriately. This is no slam-dunk. It will take ample training (thus good income for workers) in software, netiquette and the offerings of target Web sites. But if you can offer live operators online 24x7, making sales while you sleep, wouldn't that be worth it? By sharing costs among dozens or hundreds of sites, it can become a worthwhile service for even small merchants. If Visa and Yahoo were smart, this would be the result of their recently-announced alliance.

Clued-in, Clueless

Clued-in this week is Joseph Bannon who has turned some easy-to-get stories into an excellent vertical-market news source covering online commerce called The Online Financial Networks. He's made a good start at creating value. The key now is building communication among readers to create more value, then capitalizing on it.

Clueless this week is Matt Drudge, who claimed he wasn't a journalist when former Clinton advisor Sidney Blumenthal slapped a $30 million libel suit on him for repeating a false rumor without checking it out. Matt, when you try to make a living from regular writing, you're a journalist. And you should have gotten some insurance.

A Clue...to Internet Commerce is a weekly publication of @Have Modem, Will Travel. It's sent free to a qualified e-mail list. Like Netscape Navigator, it carries a list price -- $49 per year. (Unlike Netscape, we don't expect you to pay it.)Subscribers can receive either a .txt file or an .htm file. The .htm version features links which become active when online with a browser, or an e-mail package like Netscape 3.0. (Let us know which you prefer.) To take your name off the list, simply write REMOVE as the subject, or content, of a message replying to this post. To request your free copy, write us at Dana Blankenhorn@worldnet.att.net. We're on the Web at www.tbass.com/clue and www.ppn.org/clue.

A Clue...to Internet Commerce -- Copyright @Have Modem, Will Travel and Dana Blankenhorn, 1997